I hold BOL, and I am way out of pocket because I initially bought them at about $2.50 on average. I bought BOL then (in the middle of 2007) because they supplied services to infrastructure builders and miners, and I thought that this was a good theme, and my son held them, and he had done well. I was new to the game, so I did not do the research that I now do. There is no better teacher than the loss of thousands of dollars. In about March 2008 I bought 11,100 of them at 88 cents
Anyhow, the reality now is the facts that now pertain to BOL, including its current share price (BOL closed at $1.195 today, Friday, 29.8/08).
Starting with the big-picture stuff, consider the following:
a) BOL supplies to major mining and infrastructure builders – that is good.
b) Cranes are in short supply, which obviates the need for BOL to cut prices, and it makes it difficult for users to buy cranes for quick delivery – these factors are good for BOL.
c) Money is tight, so crane users do not wish to invest in cranes when they can hire them – that is good for BOL
d) BOL expanded too quickly, and experienced difficulty digesting an acquisition – a valuable, if expensive, learning experience that should make BOL’s management smarter in future – firms that have been to the University of Hard Knocks often do well in later life.
e) BOL’s business generates a good cash flow, so banks are not averse to lending BOL money, and if BOL needs to borrow for equipment, the equipment purchased provides good collateral. If BOL cools its pace of expansion, it can reduce the need to borrow.
f) The MD bought 200,000 shares at $217,000 recently – that is a good sign.
Now let us look at the numbers.
The statutory profit was $18.6 million, but this included corrections from earlier periods and reducing intangibles in the balance sheet. The real operating profit was $22.2 million. This means we should normalize the EPS of 10.9 cents by that ratio to get 13 cents. The dividend per share was 5.5 (50% of the EPS), so we can alter this to 6.5 cents. I ignore the bad-weather excuses that BOL seems to trundle out with monotonous regularity – storms are normal
If we presume modest growth, then a Price-Earnings ratio of 10 is not out of court, and thus we get a share price of $1.30. This is simplistic, but it is a start. If you picked a PE ratio of 9, then you would get $1.17, so somewhere between $1.15 and $1.30 is probably as good a guesstimate as any. BOL closed at $1.195 today (Friday 29.8/08), so it seems fairly reasonably priced. Of couse, some good news could pop out of the woodwork (e.g., a synergistic merger that optimizes depot utilization), and give us an upside surprise.
Tutt Bryant (TBG) is to a degree in the same line of business as BOL, and buying TBG might be a better option. TBG’s EPS is 20.5 and its dividend per share is 8 cents. TBG has a better recent record than BOL, so its PE ratio could be a tad higher than BOLs. A target price between $2.00 and $2.20 would seem reasonable. It closed at $1.46 today. I do not hold TBG.
Pioupiou